Oil prices are under pressure as bearish sentiment increases as OPEC+ disappoints the market with its promise to extend voluntary cuts until the third quarter of 2024 and baseline cuts until the end of 2025.
– Combining an in-person meeting in Riyadh with a hybrid online option for smaller producers, OPEC+ agreed to extend existing production cuts into next year, while paving the way for a gradual phasing out of most restrictions.
– The latest round of voluntary production cuts, agreed in November 2023, will be phased out over 12 months, raising OPEC+’s collective target to 36.27 million barrels per day, more than 2 million barrels per day higher than the current production.
– The UAE was the big winner of the OPEC+ meeting after securing another upgrade to its official production quota, allowing it to boost output by 300,000 barrels per day in several steps by 2025.
– Although Saudi Energy Minister Prince Abdulaziz bin Salman insisted that OPEC+ has the choice to pause or even reverse the upcoming easing, the market saw this as a sign of increased supply in a period of uncertain demand.
Market movers
– The shipping arm of ADNOC, the UAE’s national oil company, has agreed to acquire British shipowner Navig8 for $1.5 billion, taking over a fleet of 32 tankers and the operation of six shipping pools.
– American Midstream Major Energy Transfer (NYSE:ET) has agreed to acquire Midland-focused pipeline operator WTG Midstream in a deal valued at $3.25 billion, including a $2.45 billion cash payout.
– Japan’s largest gas supplier Tokyo Gas (TYO:9531) is looking to invest in U.S. natural gas assets, building on its recent $2.7 billion purchase of Rockcliff Energy and its 49% buyback in trading firm ARM Energy.
Tuesday June 4, 2024
Last weekend’s OPEC+ meeting extended voluntary production cuts into the third quarter of 2024 and the original cuts of 3.66 million barrels per day until the end of 2025. That promise was not enough to convince market participants that the future of oil is looks rosy, with Brent losing almost $3 per barrel. in just one trading day and fell below the $77 per barrel mark. With the promise of more supply coming to the market in 2025, the list of bullish factors has shrunk to a bare minimum.
OPEC+ extends voluntary production cuts until the third quarter. Quickly organizing an in-person meeting in Riyadh, OPEC+ members agreed to extend voluntary cuts of 2.2 million barrels per day until the third quarter of 2024, while also setting the course for a gradual easing of the remaining cuts in 2025.
Disruption in Norway pushes European gas to 2024 highs. European TTF gas futures have risen to their highest level yet this year, at €37 per MWh, after Equinors (NYSE:EQNR) Sleipner’s offshore hub halted operations due to a crack, which also led to the closure of the Nyhamna processing plant.
National strike paralyzes Nigerian industry. Nigeria’s main unions have shut down the country’s power grid and halted flights across the country as they demand a 1,500% increase in the minimum wage amid unprecedented inflation, sparing the country’s oil production so far.
Hedge funds return to oil speculation. After six consecutive weeks of short positions, portfolio investors increased their net holdings in the six major oil futures and options contracts in the week ending May 28, mainly by closing their short positions ahead of the OPEC+ meeting.
South Korea may have found oil. South Korea, one of the world’s most import-dependent countries, has approved exploratory drilling for potentially vast oil and gas deposits off the country’s east coast, with KNOC leading the estimate that could yield as much as 14 billion barrels of oil equivalent.
The exodus of oil giants from the British North Sea continues. Global oil giants Shell (LON:SHEL) And ExxonMobil (NYSE:XOM) are nearing an agreement with independent British producer Viaro Energy to sell their joint gas fields in the southern North Sea for $0.5 billion, ending Exxon’s 60-year presence in the country.
Indonesia postpones export ban on copper concentrate. Indonesia, one of the world’s top copper producers, has postponed the start of a ban on copper concentrate exports until the end of 2024 due to delays in smelter construction, potentially sending copper prices down into the summer.
US resumes purchasing oil for SPR. The U.S. Department of Energy has resumed purchasing 3 million barrels of oil for the country’s Strategic Petroleum Reserve at an average price of $77.69 per barrel for delivery in November, bringing the total repurchased to 38.6 million barrels comes.
Sheinbaum’s landslide victory worries Mexico’s oil industry. Mexican President-elect Claudia Sheinbaum’s landslide victory will allow the ruling party to officially dismantle the 2013 energy market liberalization by amending the constitution, limiting future oil production growth in the country.
Indian heat waves increase gas consumption. As heatwaves have claimed dozens of lives across India, the country’s natural gas-based power generation rose to record highs in May, nearly doubling year-on-year to 4.7 million kWh, while coal still accounts for 75% of generation capacity. .
Chinese emissions rules to limit fuel demand. Beijing will mandate a 5% reduction in CO2 emissions intensity compared to 2020 by the end of 2025, lifting purchase limits on non-fossil fuel cars and encouraging the electrification of industrial vehicles, fueling demand growth to petrol and diesel is limited.
American oil giant takes Venezuela to court. A court in Trinidad and Tobago has awarded the US oil major ConocoPhillips (NYSE:COP) the right to enforce a $1.33 billion claim against Venezuela for the appropriation of its oil and gas assets, potentially derailing the development of offshore gas fields such as Dragon or Cocuina-Manakin.
Australian LNG comes back into force. American energy giant Chevron (NYSE:CVX) has resumed LNG production at its Gorgon liquefaction facility on Australia’s Barrow Island after a mechanical fault halted operations for a month, reducing production capacity by 5.2 million tonnes per year.
By Michael Kern for Oilprice.com
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